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We introduce a simple and flexible method to price derivative securities on assets with volatilities which are stochastic. As a special case we treat the SABR model in more detail. Our approach is based on the construction of recombining trees using interpolation methods on probability measures, and this makes it very suitable for the application of parallel computing techniques. We show how one can...
This paper discusses evaluation modelling of investment options in path integral framework with the help of Geske-Johnson's analytical approximation for American options. Detailed procedure is presented with assumption that underlying assets price follows a geometric Brownian motion, the particular algorithm is summarized and the evaluation is optimized by using Lagrangian interpolation polynomial...
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